Their situation is not an either/or, it's both. It's an awesome model and I think eventually a lot of companies will replicate something similar using AR.
Sure. I am thinking of the classic "How I Found Freedom in an Unfree World," in which there is a discussion of natures. It strikes me that Niantic produced a product which resonated with the nature of kids. Apple in the Jobs days strove to produce technology that was consonant with human nature, which meant they sometimes seemed slow but built things that made sense, and made obvious decisions quickly (no ad tracking in iMessage, for instance). Even Google in its early days built a search product that was quite more human than competitors. Products that irritate human nature can succeed, but perhaps not for too long.